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The company, which earlier this month announced it would buy rival Handspring, said worldwide sales rose 5 per cent compared with the same period last year. Revenue had fallen in the previous six quarters as demand for handheld computers slumped amid the ongoing economic slowdown.

Palm, which makes hardware and the software that powers handheld computers, has managed to stabilise its business this year with sales of its "Zire" line of lower-priced models. But gross margins in the latest period were 32.5 per cent, compared with 40.9 per cent a year earlier.

Eric Benhamou, the company's chairman, said the results offered additional evidence the handheld industry was in a pattern of "progressive recovery".

Palm reported a net loss of $15.1m, or 51 cents per share, for its fiscal fourth-quarter, compared with a net loss of $27.5m, or 95 cents, a year ago. Not including special items, the company lost 30 cents per share. Wall Street analysts expected Palm to lose 93 cents per share.

Revenue in the period, which ended May 31, was $225.8m, compared with $233.3m last year, but better than analysts' expectations of $187m.

The company also said it expected sales in the current fiscal first quarter would increase slightly from the same period last year. Palm said sales would be in a range of $175m-$185m, compared with $172.2m last year.

The company moved to buy Handspring in hopes its rival's new smart phone devices could boost the company's flagging fortunes.